History of Canada - Unit 2 - Lesson 5 Autonomy and the Stock Market Crash

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1 History of Canada - Unit 2 - Lesson 5 Autonomy and the Stock Market Crash Objectives: Learn about actions to make Canada a more autonomous nation Examine the factors leading to the Stock Market Crash Explore life in Canada during the Great Depression Requirements: Greater Autonomy handout Business Cycle and Economy handouts Six Factors of the Stock Market Crash handouts Stock Market Game Item Task 5-1 Greater Autonomy for Canada Read and discuss some of the events in the 1920s bringing greater Canadian nationhood and autonomy from Britain (outline attached) 5-2 Stock Market Crash Examine the ideas of a Business Cycle and American branch plants Learn about the factors leading to the Stock Market Crash of There are six factors (handouts in binder). Working in teams of three or four, each student group reads and summarizes one factor. The group reports to the class their findings. Students take notes. The factors are summarized and discussed as a class 5-3 Stock Market Game Play the Stock Market Game (outline attached, stock certificates in binder) 5-4 Per Capita Income by Province Use the data in Table 1 to calculate the drop in per capita income by province from 1928 to Interpret the table How did the Depression impact each province?

2 Grade 10 History of Canada Unit 2 Lesson 5 The Great Depression 29 October 1929 Stock Market Crashes Black Tuesday Setting the Stage FOREIGN INVESTMENT At the beginning of the 20 th Century, Canada s biggest foreign was Britain. The British invested in low risk enterprises. With WW1, British investments slowed and USA investment increased. Americans invested in rapidly expanding and more high risk areas of Canada s economy (e.g., mining, pulp and paper) Americans took greater control over the Canadian businesses and introduced branch plants. These plants produced the same products as the American parent plant. To avoid paying taxes and tariffs, the American marked the products Made in Canada. What would be the possible positive impacts of American investment? negative impacts? Positive USA investment would help develop Canadian industries USA investment provided jobs USA investment could help develop Canada as a world economic power Negative Decisions were made in USA Top jobs in management were only held by Americans Profits earned by Canadian branch plants were sets to USA Fear of economic takeover by USA Research and development (intellectual wealth) in USA only

3 Grade 10 History of Canada Unit 2 Lesson 5 The Great Depression 29 October 1929 Stock Market Crashes Black Tuesday Setting the Stage FOREIGN INVESTMENT At the beginning of the 20 th Century, Canada s biggest foreign was Britain. The British invested in low risk enterprises. With WW1, British investments slowed and USA investment increased. Americans invested in rapidly expanding and more high risk areas of Canada s economy (e.g., mining, pulp and paper) Americans took greater control over the Canadian businesses and introduced branch plants. These plants produced the same products as the American parent plant. To avoid paying taxes and tariffs, the American marked the products Made in Canada. What would be the possible positive impacts of American investment? negative impacts? Positive Negative

4 BUSINESS CYCLES Note The Stock Market crash was not the cause of the Great Depression, rather it was a symptom. Economic conditions constantly change. When the economy is good, business grows. When the economy is bad, business declines. The up-and-down swings are called a Business Cycle. A Business Cycle has four stages: Prosperity, Recession, Trough or Depression, and Recovery. During the 1920s, the economy was in the Prosperity stage. As a Recession set in during the late-20s, business began to slow. Sales began to fall. Production slowed and jobs were lost. Unemployed workers had less money to spend. As the Recession spread, it became a Depression. bankrupt. More jobs were lost. Many businesses went STOCK MARKET CRASH BLACK TUESDAY In the 1920s, many people invested in the Stock Market. On 29 October 1929, the stock market crashed. There were many reasons for the crash Overproduction and Over-Expansion Canada s Dependency on a Few Primary Products Canada s Dependence on USA High Tariffs Cut Off International Trade Too Much Credit Buying Too Much Credit Buying of Stocks

5 STOCK MARKET GAME The aim is to learn about stock losses during Black Tuesday. Instructions 1. Three students serve as stockbrokers. The brokers set up offices in the corners of the classroom. Brokers are given a supply of stock certificates and a record page. 2. Other students are investors. Each investor keeps an expense sheet. Each investor has $5,000. that they plan to invest in stocks. The investor may spend any amount of her/his money on one, two or three stocks. 3. The investor cannot sell their stocks between periods until advised. Rather, each investor records gains or losses Stocks are a hot commodity. Everyone wants to make a fast buck. Without researching the value of the companies, investors purchase shares in Canadian companies or branch plants. In this period, investors must buy stocks. They have five minutes to make transactions with any stockbroker. All transactions are recorded by the broker and the investors (e.g., Investor A bought 100 shares of International $25/share. Investor A spent $2,500 for this stock purchase) Two years have passed. The economy is strong. Stocks have increased in value. By 1927, railway stocks increased annually by 10% as USA investors sought to build more access to Canada s west. The value of utility stocks also went up by 15% annually in this period. Finally, investors were flooding to resource extraction and metal company stocks. These stocks increased by 25% annually. Each investor calculates the increased paper value of their stocks and records the new value on their record sheet. Investors cannot sell stocks for cash, but they have the option of trading one stock for another stock. 3 September 1929 The stock market is showing signs of weakness. Since 1927, railway stocks have annually lost 5% of their value. However, utility stocks and metal stocks continue to grow at a healthy annual 5% respectively. Investors decide not to sell their stocks. Each investor calculates the new paper value of their stocks and records the new value on their record sheet.

6 4 Black Tuesday The market crashes. Almost instantly, stock prices fall. The volatile metal stocks lose 75% of their value. Utility stocks also drop significantly. Utility stocks lose 50% of their value. Finally, railway stocks drop 25% of their value. Each investor calculates the new paper value of their stocks and records the new value on their record sheet. If the investor wishes, he/she can sell their stocks back to the broker at the reduced value There are signs of a recovery, but stock values continue to fall at the same rate as during 4. Each investor calculates the new paper value of their stocks and records the new value on their record sheet. Debriefing a. In September 1929, what would you do as an investor with your profit? b. How would you feel about your profits? c. What do you think investors and companies in the real world did with their profits in September 1929? d. How did you feel about your losses? e. What would you do if this were real life? f. How would your actions impact the economy? g. Would you start buying stocks in 1932?

7 Stock Market Game Record Sheet Consolidated Steel Number of Shares Initial Value in this Rate of Increase or Decrease Gain or (Loss) Final Value in this September 1929 October Maritime Electric Number of Shares Initial Value in this Rate of Increase or Decrease Gain or (Loss) Final Value in this September 1929 October

8 International Nickel Company Number of Shares Initial Value in this Rate of Increase or Decrease Gain or (Loss) Final Value in this September 1929 October

9 Grade 10 History of Canada Unit 2 Lesson 5 The Great Depression Calculate the Percent Decrease in Per Capita Income for each province of Canada between 1928 and Table 1. Per Capita Income by Province in and 1933 Province Average Per Capita Income (A) 1933 Average Per Capita Income (B) Percent Decrease (100 ((B / A)100)) British Columbia Ontario Alberta Saskatchewan Manitoba Quebec Nova Scotia New Brunswick PEI Did the Great Depression impact all provinces equally? Which provinces were most impacted? Provide one reason why you think these provinces were most impacted.